Downside risk connectedness between Islamic sectors and green bond markets: implications for hedging and investment strategies
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Date
2024-01-02
Open Access Location
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor and Francis Group
Rights
(c) 2024 The Author/s
CC BY 4.0
CC BY 4.0
Abstract
This study explores the relationship between the green bond and Islamic sectoral markets in terms of downside risk. A new framework was developed using CAViaR and QVAR techniques to construct hedging and portfolio strategies. Results show higher levels of downside risk connectedness and spillover across different risk environments, with short-run connectedness outperforming long-run. The downside risk connectedness and spillover are time-varying, influenced by major events like the Shale Oil Revolution, US–China trade war, COVID-19 pandemic, and Russo-Ukrainian conflict. Green bond market indices of China, the European Union, the US, and the global market receive net shocks in moderate and higher downside risk environments across various frequencies. US and global green bonds exhibit net transmitter roles in a downside-risk environment. Islamic Sectors BM, OG, FIN, CG, and HC are shock transmitters, while TELE and UTL are shock receivers across different downside risk environments and frequencies. Net roles are CS, INDUS, and TECH, subject to the downside risk environment and frequencies.
Description
Keywords
Green bond market, Islamic markets, dynamic connectedness, hedging effectiveness
Citation
Billah M, Hoque ME, Balli F, Kaur J, Kumar S. (2024). Downside risk connectedness between Islamic sectors and green bond markets: implications for hedging and investment strategies. Applied Economics. Latest Articles. (pp. 1-34).